IlIBRARY OF CONGRESS.! 



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! UNITED STATE&- OP AMERICA, i 




THE FINANCIAL CONDITION 



I 




SPEECH 



OF 



WILLIAM SPKAGITE 



IN THE 



SEMTR OF THE UMTKD STATES. 



31 ARCH l/>, 1S09. 






/ 

Nev^-York 



P /^ JOHX A. GRAY & GREEN, PRINTERS, 16 AND 18 JACOB STREET. <Jji^ 




1869 



•Si 



TKE FINANCIAL CONDITION. 



-«>- 



SPEECH 



OF 



William Sprague, 



IK THE 

/ 



SENATE OF THE UNITED STATES, 



MARCH 15, 1869. 




THE FIMNCIAL COIDITIOE 



Mr. President : It is not my intention tliis morning to make 
a speech, or to enter into the discussion of this question by any 
show of statistics, or any details that will weary the Senate, or 
be tedious' to my listeners. I have thought of this subject of 
finance with a great deal of anxiety. I have brought to bear 
upon its consideration the position in which the industries of 
the country are placed. I have compared those industries with 
the industries of other countries, and I have also compared the 
plan of finance which governs and controls our affairs with the 
plans of finance which govern and control the affairs of other 
countries. And, sir, I am weighed down with anxiety when I 
contemplate the ruin in store for us, unless we pause in the 
forced policy we have been pursuing since the close of the 
war. 

When the Duke of Wellington conceived the idea that the 
English troops could fight in two ranks, and thereby, in his 
judgment, overcome the masses of French infantry, then domi- 
neering and triumphing over all Europe, he became tired and 
weary in the contemplation of that subject, and, obtaining leave 
of absence from the Indian government, reported himself at 
home and obtained employment. And with that simple idea in 
his head, he stationed himself in the Peninsula, and with the 
troops of whom he had charge, and the fortifications he found it 
necessary to build, he pursued his idea, and triumphed in his 
turn over Napoleon, who had subjugated Europe and triumphed 
over the best generals that the allies could bring to bear. I 
' mention this to show that there are little things which govern 
the greatest of human affairs. 

A few weeks since, in order to understand something of the 
condition of the South, I visited Georgia, and naturally was in- 
vited to inspect a cotton-mill. In the city of Augusta, Greorgia, 
is a cotton-mill that to-day will surpass, and does surpass, in the 
success of its operations, the best one in Kew-England ; and the 



secret of that success lies in tlie turn of one roll where the cotton 
is delivered on the spindle ; it turning one hundred and fifteen 
turns to the minute, while others in New-EDgland, and even by 
the side of it, turn ninety or one hundred. 

Columbus, after he had discovered America, was asked at a 
festive board how, among all the people of his time, he should 
have discovered the New World. He asked them to stand an 
egg upon its end. They made every effort to accomplish the 
purpose, and, failing, looked to him. Cracking the egg on the 
end, it stood. It was sufficient ; thev understood him. jSTow, I 
send to the chair my proposition of finance, and ask that it be 
read. I do not offer it as an amendment, but simply as a paper 
on which, and on which alone, in my opinion, the financial pro- 
blem can be solved. 

The Yice-Peesident. The Secretary will read the paper. 

The Chief Clerk read as follows : 

That the President nominate, and by and with the advice and consent 
of the Senate appoint, a commissioner, a deputy commissioner, and twenty- 
fom' judges of finance, to be selected from among men of wide experience 
and marked skill in business, exclusive of those engaged in banking, to 
examine into the English system of finance, touching the reception and 
disbursement of the national income, and to report at the next session of 
Congress a plan for the reception of the national revenues into the Treasury 
and the disbursement thereof, and to disconnect from the Treasury its juris- 
diction over national banks. This power vested in said commissioners 
shall be so directed as to obviate the scarcity of money and high rates of 
interest, caused by the withdrawal of Treasury revenues from the market, 
by keeping daily in the market the same sum as is received into the Trea- 
sury, and to place the same on the market at such points as will check the 
increasing rates of interest, and increase capital while decreasing the cost 
thereof. 

Mr. Sprague. It will be seen by that paper that my opinion 
is not favorable to an increased issue of legal tenders or of 
national bank currency. It will also be seen that I am not in 
favor of a repudiation of the national debt. But, sir, I do not 
sympathize with that class of men who are holding up to the 
gaze of the people of the United States the sacredness of that 
debt. I was opposed in your caucus, Mr. President, to an amend- 
ment of the Constitution giving undue protection to that debt, 
and I am also now opposed to any reiterated protection by the 
law contemplated by the bill before the Senate. I do not think 
that there is much sacredness in the issue of bonds for the Pacific 
Eailroad, which has become a part of your national debt ; and I 
see nothing sacred in the thousand and one unnecessary appro- 
priations constantly made at each session of Congress. 

The great bulk of the debt of the nation has been created in 
pursuance of a necessary and important object, that of main- 



taining the territorial integrity of the United States. In Great 
Britain to-day, the profits on almost any one of her great indus- 
tries — her commerce, her manufactures of iron, or of coal, or of 
cotton, or of wool — are sufficient to pay the interest on her na- 
tional debt. But is it the part of a people to drift into the 
condition of Mexican society, where the national debt is an 
oppressive burden to the community ? If those whose business 
it is to make light the public burdens neglect, either from ignor- 
ance or from any other cause, to pursue a policy that will relieve 
instead of a policy that will destroy, if the people of this country 
are to-day, in consequence of the public debt bearing heavily 
upon them, drifting, as I verily believe, into the condition of 
Spanish and Mexican society, would any one demand that state 
of slavery rather than a cancelation of the debt ? 

Sir, you have provided for wholesale repudiation of private 
debts by your enactments at recent sessions of Congress. You 
can cancel debts between individuS,ls, between the citizens of 
the country; but you look with holy horror upon a suggestion 
that if you pursue a policy of destruction this incubus will be 
sloughed off. 

The Senate must know facts connected with the industries of 
this country. I told you, two years ago, that you had lost, or 
would lose if you were not exceedingly careful in reference to 
you»r future legislation, your monopoly of cotton, and nobody 
believed it; nobody will believe it now; but let me tell you 
that you have lost forever your sea-island cotton. Gro to the 
South and make inquiries there. It is a thing that was, and 
the whole South is to-day trying to find a substitute in the rami 
or China grass, that will grow more prolifically, whereby they 
-can replace that which has been lost. I tell you, sir, that in 
five years under the system of finance pursued by the project- 
ors of this bill, that which of itself was a monopoly and has now 
ceased to be a monopoly, will cease to be a profitable business 
to those who are engaged in it. It may be that some of my 
friends from the South are watching the encroachments made 
upon that interest in Egypt, in India, and in Brazil. 

The last statement from England of the receipts of that fibre 
shows a marvelous increase ; one half of the cotton used by 
Grreat Britain is to-day received from Egypt, India, and Brazil ; 
and the cotton produced by India, by Egypt, and by Brazil, 
is equal for all necessary purposes to that produced in this 
country. 

But I have another point to urge upon the Western men of this 
Senate ; it is that the boasted strength and prosperity of that 
section is but a shadow ; and I point to the reports of the pro- 



6 

duction of one article wliicli is but a representative of all tlie 
others, wheat. It is the deliberate judgment of men who have 
statistics in their hands and are acquainted with this subject, 
that in the old States, on the old lands, exclusive of California, 
five bushels per acre is the amount of the crop on the average 
produced in the Western States, and that, including California 
and all the new lands that are taken up, eleven and a half bush- 
els to the acre is the outside figure. What is the production of 
England, Ireland, and Scotland ? Twenty-eight bushels per 
acre. Now, let me ask what prospect there is of the farmmg 
interest of this country competing in the markets of Europe ? 
Sir, I 'do not care how large a product may be made by the 
American producer, if it costs him more than he gets for the 
article he produces, there is no wealth to him and no wealth to 
the nation. 

It is within my owq experience that the capital required to 
do the same business in this country beyond that required by 
the man doing a similar business in Great Britain, is more than 
three and a half times as much; and I illustrate it in this way : 
The English manufacturer plies his spindle at eighty cents, and 
does his business upon a capital to employ that spindle of eighty 
cents ; the American manufacturer is compelled to employ a 
capital of $2.75 for a single spindle. 

That is answer enough as to whether the volume of currency 
per head here, if equal to the volume of currency per head in 
Europe, is sufficient for this country. That is but one illustra- 
tion ; but it illustrates the whole business of the country, me- 
chanical, farming, and manufacturing. It is a case in point and 
illustrates the whole. • Every thing is in just that situation. 

I will give you another instance to complete the picture. 
We make horse-shoes in this country, and it costs, without count- 
ing the capital invested, five cents per pound for each shoe. I 
can go to Canada and have them made for two cents per pound. 
The disparity is two cents there against five cents in this coun- 
try. Is it known to the Senate, or to any body, that in every 
article that is produced in this country, whether it is an article 
of mechanics, manufactures, or agriculture, a very large element 
of the cost is the price paid for capital ? Take, for instance, 
corn at fifty cents a bushel. Two thirds of that fifty cents is 
the cost of the capital employed in the production of that bushel 
of corn. 

Every body in this country is willing to admit that we are 
wanting in capital, and that any measure which will tend to cre- 
ate capital in this country is that which is desirable beyond all 
other things. Kow, I tell the Senate and I tell the people of this 
country, that the policy pursued from the beginning, of contrac- 



tion and a constant indorsing of a public debt, lias in effect driven 
capital from this country, made tliat whicb was scarce still scarcer, 
ruined your commerce, your manufacturing, and your farming, 
and even the bankers themselves, who are now constantly at 
your bar begging for some help — even they, eating their own 
words, admit that they are losing from day to day the business 
in which they were heretofore engaged, and they are giving it up 
by force to such interlopers as Fisk and Gould, and can not 
help themselves. They are tied hand and foot as surely and as 
certainly as they have tied this Senate and this country ; for 
who ever heard of a policy that would drive a public debt or a 
private debt into the hands of the people of other countries ? 
Why, sir, that absurd doctrine was given up two hundred and 
fifty years ago. In Elizabeth's time, the whole people of Grreat 
Britain were ^agreed that the public debt was a capital, and the 
interest from time to time paid on that debt should go to increase- 
the capital within the territory of Grreat Britain, and by that in- 
crease her industries became more prosperous. But, sir, on the 
other hand, we have been trying to force beyond our borders 
the very thing on which and by which alone we are able to do 
our business. Bonds, currency, interest, are capital, and you 
can not separate one from the other. 

But, sir, look and see what you have done with the banking 
capital of this country. It is an interesting subject to contem- 
plate. There are $420,000,000 of national banking capital, and 
what have you done with it? I will show you. Three hun- 
dred and forty million dollars are locked up in your Treasury 
as security for circulation ; $37,000,000 are locked up to secure 
deposits ; there are $36,000,000 of bonds otherwise ; there, are 
$20,000,000 of other stocks and bonds. Then a large amount 
of the capital, in the shape of legal tenders, compound interest 
notes, and three per cent certificates, is compelled by law to be 
hoarded in the banks. 

This whole capital, with from sixty to eighty millions besides, 
is forced into a dark corner. All there is now on which the in- 
dustries of this people can be conducted is what little national 
bank currency there is afloat and the Government legal ten- 
ders, which by statute are constantly being reduced and hid 
away in the vaults of the banks. The interest that is paid by 
the borrower to-day is just double what it was at the close of 
the war. 

I have said that the capital required by the farmer and the 
mechanic in this country, over that which is required in Great 
Britain, is three and a half times. Add to that the double 
rate of interest, and it is unnecessary that you shall pursue 
your inquiries one step further to understand exactly where 



8 

the evil is in your financial management. It is just there and 
nowhere else. Great Britain's system of railroads, based upon 
her low interest and abundant capital, will carry a ton of coal 
one Hundred miles for what it costs me in this country to carry 
a ton of coal three miles. I pay for carrying a ton three miles 
^s much as the manufacturer in Grreat Britain pays for trans- 
porting it one hundred miles. 

All these things are true ; there is no mistake in one of them ; 
and there is no necessity whatever to surmise or to speculate as 
to what is the cause of the present disturbance in business. 
Go ask any distributor of goods in New- York or Boston what 
is the condition of their accounts for the past three years touch- 
ing the payments of the debts made by the West, and there is 
not one of them who can show that he could pay his interest 
and his rents. There is not one of them who, i^ he tells you 
the truth, will not say that he is in debt ; the poor debts that 
(have been made, the failures that have occurred, have been 
:greater than all the profits made from business ; and they will 
tell you again, that the securities otherwise in their possession 
are weakened twenty per cent. 

How long, I ask, can a country pursue that sort of business 
and be assured at all that it can maintain any value for its pub- 
lic debt ? Some people — and there are such here in the Sen- 
ate, perhaps — will say that the recent advance of your bonds in 
Europe was caused by the proposition now before the body. 
There are some people who will believe even that that is the 
fact. Well, sir, if it is any satisfaction for them to know it, I 
can state that at the same time, and from the same cause, the 
Government bonds of Turkey assumed a similar relation as to 
price ; they advanced about six or seven per cent. The cause 
of it was simply that the English capitalists had taken two or 
three per cent long enough,* and they were willing to take great- 
er risks and obtain securities that would pay a higher rate of 
interest. 

Some people, too, will say that the rise in the value of your 
currency was occasioned by some remark that has been made 
by somebody, or some resolution before the bar of this Senate, 
or otherwise ; that that was the cause of an increased value to 
your paper. What was the cause ? This rise in the value of 
your securities drove them to Europe, and drove to Europe the 
capital on which your business was done, and exchange has 
been drawn against them coming in competition with gold, and 
the result was inevitable. Sir, that was the cause, and no other. 
The idea of resolutions like this before the Senate or anywhere 
else, or articles in newspapers, or speeches made by any body, 
having an effect upon the price of gold or the value of your 



bonds, is the most complete absurdity that ever afflicted the 
brains of sensible men. 

Congress and the Supreme Court seem to be acting in accord 
on this subject. My friend from Indiana [Mr. Morton] in bis 
remarks the other day, told the Senate that the second section 
of the bill was in qualification of the dangerous influences con- 
nected with the recent decision of the Supreme Court. As my. 
mind is not taken up with any of the ameliorating projects, or 
any of the medicines that are used to cure this disease, I had 
not paid any attention whatever to the merits of that section 
in detail ; but it was the business of somebody to take some 
notice of it, and my friend from Indiana was correct in the 
judgment he gave, and the Senate, led by outside influences, by 
men who have given this question no study whatever, were 
wrong, and I will show you how. I read from the Bankers' 
Gazette of Friday, March 5th, 1869 ; bankers tell the truth 
sometimes : 

" Since the late legal tender decision of the Supreme Court authorizing 
contracts to pay coin, lenders feel more at liberty to demand coin interest, 
and the banks and conservative private bankers who heretofore have 
declined to accept more than seven per cent in currency, now feel less hesi- 
tation about asking gold rates when the condition of the market enables 
them to do so." 

In the interest of high cost of interest, in the interest of pro- 
tection to capital, the capital now absorbing all the best interests 
of this country, to destroy them. If I should say to any body 
that it is my deliberate judgment that this Grovernment has failed 
in the object that it was intended by its projectors to secure, I 
suppose I should be scouted at. But, sir, when I compare the 
situation of this country to-day with the situation of that coun- 
try from whence we sprung, I find that not only in capital, but 
in general intelligence, in education, in liberty among the peo- 
ple, they far exceed the privileges and the power of the people 
of this country. They are increasing in a ratio most astound- 
ing in education and in the refinements of life, as the statistics 
show. After the convulsions which racked this continent, and 
considering the intimate relations that subsist between this coun- 
try and Great Britain, what was the effect of our war upon that 
nation ? A simple Fenian commotion ; and that was all. Look 
at her commanding one fifth of the territory and one fourth of 
the population of the globe ; her commerce occupying prosper- 
ously and profitably every sea ; her industry permeating and 
being introduced into every market in the world, standing 
strong, able, and powerful everywhere. And where are we ? 
All we have to help ourselves in the world is our cotton, which 
we are about to lose, and our tobacco, which we shall lose. 



10 

My friend from California (Me. Cole) will say that we have 
the production of gold. Sir, that bears the fortune of cotton, 
and wheat, and every thing else. You find in the gentleman's 
own State that the high price of capital and its scarcity, made 
so by your acts, have driven men from the production of gold 
into farming and wool raising. The paper I have before me 
shows and criticises the immense falling off in that production. 

What, I ask, are you to rely upon to sustain the price of 
your public debt, when there is no profitable occupation for 
your people ? Will this bulling operation that you have tried 
for the past three years have any effeet ? What will this pro- 
position of curtailing the currency, in order to increase its 
value, effect ? Nothing but the same old story : want of pros- 
perity, want of employment, and a condition of national indebt- 
edness like that of Mexico. Why not have made an effort to 
restore prosperity to all the branches of your industry on which 
to have floated your debt and maintained its price, rather 
than, by constitutional amendments and by statute law, be con- 
stantly making an effort to bull up the price of your national 
securities, driving what little capital there was left into their in- 
vestment, and depriving every industry of the necessary means 
to carry it on ? 

I do not sympathize at all with any of these projects for pay- 
ing the five-twenties in greenbacks or legal tenders, because 
that will be depriving the Government of full value for what 
they gave, and it will be robbing the people ; for the introduc- 
tion of an additional amount of currency, not heretofore well 
settled, not heretofore permeating through all the avenues of busi- 
ness and trade, will, for the time being, depreciate the value of 
all, and that capital being the only capital that the people hold, 
they would be robbed by any such increase of issue. If those 
whose business it is to look well into this question, will examine 
the policy pursued by Morris when closing up the business of 
the Confederation after the Eevolution, or by Hamilton in re- 
constructing the finances on the formation of the Constitution, 
or by Dallas when correcting the evils growing out of the war 
of 1814, and will embody upon our system the theory and prac- 
tice established by those men, the country will ask for nothing 
better. 

The country and its business interests were prostrated to the 
very dust three months ago by the retirement of $6,000,000 of 
currency by speculators in New- York through Fisk and others ; 
and yet last month there was drawn into the Treasury $13,000,- 
000 more than was distributed to the country — enough to stag- 
ger even the strength and stability of Britain's finances. No 



11 

nation under heaven can stand that draught upon it, can stand 
the scarcity produced by that result. And yet people wonder 
why we are so affected by the rise and fall of gold ; and we say 
it is owing to the fact that we are not paying specie. Sir, if 
you forced yourself into a condition of the payment of specie 
to-morrow, you would not have benefited your position one iota. 
The same scarcity of capital, the same high rates of interest, 
•would exist then as exist now ; and that condition of things 
being so, you could not raise wheat in the West, we could not 
manufacture in the East, and we should have nothing to do to 
employ our commerce, nothing whatever to give to our flag on 
the sea. 

It is said that the tariff is the cause of these high prices. I 
deny it. If you will give to me a system in your Treasury that 
will let the money out of it at a given rate as fast as it is received, 
I, for one, will pledge myself to advocate the repeal of all your 
tariff laws in five years. We ask for nothing in this country, 
in my judgment, but the reception of the revenues upon the 
market to control capital in the interest of abundance and a 
lower rate of interest. Give me that, and I will be your 
strongest advocate for a repeal of all your tariff acts. 

We condemn speculators, and gold gamblers, and stock-job- 
bers. I have been led into that error myself. But, sir, those 
gentlemen but occupy the position that they have been taught 
t6 occupy, and they avail themselves of a perfectly legitimate 
trade and business. The fault is, that the Congress of the Uni- 
ted States, under bad advisers, leave open the opportunities for 
money-making in that department, inducing the people of the 
whole country who have capital to employ their means in those 
operations, withdrawing them from the business interes s ofthe 
country. Sir, you set the example of speculation when you, in 
order to create a better value for your legal tenders, make them 
scarce. What more have Drew, and Fisk, and Gould done ? — 
and yet you condemn them. What more did Yanderbilt do, 
when he convulsed the market in his efforts to place Harlem 
where he did ? You do the same thing exactly, under the sa- 
cred sanction of law and in behalf of a great people. You are 
a stock-jobber and a gold gambler, as much as any one of them. 

If the country is prosperous, why is it that you are convulsed 
with failures and bankruptcies ? Why are your newspapers 
and your courts filled day by day in every village, in every 
town, and in every city of this country with accounts of bank- 
ruptcies? There were twenty-six hundred failures in 1867, 
tv.^enty-six hundred failures in 1868, and God only knows what 
will be the extent of them for 1869. 

It is said that the Parliament of Charles II. was more sue- 



12 

cessful than any of its predecessors. It was in consequence of 
its repealing most of the laws that had been enacted centuries 
before. This Congress may with profit follow its example. 
They will do well to look back, and take back the acts which 
have tied up the capital of the country, or forced it beyond the 
uses of its people. 

I did not intend, Mr. President, when I rose to my feet tbis 
morning, to occupy the time of the Senate so long ; and I beg 
^pardon for having done so ; but the subject has worn upon me, 
and the thought of the condition to which this country is cer- 
tainly drifting, and tbe fact that those around me would not 
listen, nor will they believe what is the true condition of the 
country at the present time, the fact that no impression can be 
made upon any body about me, makes me sick at heart and al- 
most unable to move. I would not have occupied the attention 
of the Senate for a moment, if that condition of things did not 
exist. Sir, if there was any credit, or if there was any advan- 
tage to the country in the position taken by me in the beginning 
of this war, if the force of that example amounted to any thing, 
or if I have ever done any thing in the course of my lite of ad- 
vantage to the country, this of giving the exact condition in 
which, the country is* placed, transcends them all. 

The Dutcb said to the English somewhere about the middle 
of the sixteenth century, "So long as you are jealous of our 
financial policy, we shall continue to be mistress of the seas ; 
we shall continue to do the manufacturing and the weaving for 
the continent and for the world." When the Dutchman succeeded 
to the throne of James, after the revolution of 1688, England 
obtained the Dutch system, and from a power less than Holland 
at that time, with an income not as great as that of Holland, 
and not one fourth that of France, in thirty years she triumphed 
over them all. Preeminent stand William of Orange and A¥il- 
liam of N^assau — one giving liberty to his country in his contest 
with Charles Y. ; the other giving liberty, civilization, power, 
to the English, nation superior to that of any nation, ancient or 
modern. 

I have illustrated in two or three little things to show that it 
was the most trifling appendage almost to your Treasury that 
had determined all these things ; and if I can call the attention 
of Senators to that one point, and if they will look at it as they 
look at any other subject which occupies their minds, they will 
give to their country a position equal to that now held by Eng- 
land with, every other advantage bej^ond that of any people in 
the world. With this financial system fully established, the 
career of this people in development in every direction will be 
the wonder of this age and of this period. 



13 

Sir, I do not expect to influence the passage of this measure. I 
tell the Senate that every word that I have said as to either what is 
or what it is to be, may be relied upon. There can be no mistake 
in the things that I have given, because they have been found es- 
tablished on facts, upon the exact situation in which things are. 
I could give the record for them all, but I forbear; I know they 
will not be read. If, therefore, I have drawn attention in a dif- 
ferent direction from what has been heretofore given to the 
Senate, it is because I have studied this subject in the direction 
through which Great Britain has obtained her successes, and by 
which we can obtain similar successes. I know of no other way 
to understand a question, than to conipare the condition of 
things in a country embarrassed, with the condition of things in 
a country that is prosperous. I ask attentive consideration of 
the suggestions I have made, not expecting to embarrass par- 
ticularly the passage of this measure, but still being opposed to 
it as being similar in its character and tendencies to the whole 
financial system which has embarrassed the country for the past 
three years. 



